Break Agreement Terminates Lease Despite Compliance Failure
A landlord was left to count the cost of failing to persuade the Court of Appeal that a tenant’s failure to adhere to the terms of a break agreement negotiated between the two parties meant that the agreement wasn’t valid.
The tenant, who had two adjacent industrial units in Hounslow, wished to end its leases and served on the landlord the necessary notices to exercise its option to break them. Negotiations were concluded regarding the dilapidations with the effect that the tenant was released from its obligations under the dilapidations clauses provided that it kept the units in no worse condition until it vacated the premises. The tenant also agreed to pay £172,000 for reinstatement of the premises.
At the appropriate time, the tenant failed to give vacant possession of the premises to the landlord. The landlord claimed that this meant that the break agreement was invalid, leaving the tenant liable to comply with the conditions of the original leases. The most obvious effect of this would be that the tenant would be responsible for paying over £300,000 in additional rent – which would be a stroke of luck for the landlord in what was a difficult rental market.
The court ruled that the tenant had failed to comply with the conditions of the break clauses in the leases, but that the break notices given were still sufficient to break the leases.
On appeal, the Court of Appeal ruled by a majority decision that the effect of the settlement agreement was that the leases were brought to an end on the agreed date, whether the tenant gave vacant possession or not. The break agreement had clearly been intended to crystallise the respective positions of the landlord and tenant at the date of the break and modified their respective responsibilities accordingly. The breaches did not invalidate the break agreement, but instead gave rise to a separate claim for damages.
We can assist landlords and tenants in negotiations concerning leases and lease terminations.
Partner Note
Legal and General Assurance Society Ltd. v Expeditors International (UK) Ltd. [2007] EWCA Civ 7
Construction Projects – New Health and Safety Code
Revisions to the Construction (Design and Management) Regulations 1994 came into force on 6 April 2007. These are aimed at making the Regulations clearer and simpler to understand.
The Regulations apply to all construction projects, with additional rules applying where a project is ‘notifiable’. Notifiable projects are those which are likely to involve more than 500 person days of construction work or to last for more than 30 days.
Notifiable projects must have a Construction Design and Management co-ordinator and a principal contractor must be appointed.
The principal requirements under the Regulations are:
· there must be co-operation between duty holders (effectively the ‘main players’ in the project and its workforce) to protect the health and safety of everyone involved in the project or on the site;
· duty holders must take reasonable steps to ensure that they appoint only those who are competent, bearing in mind the size and complexity of the project. Duty holders such as designers must refuse to accept an appointment if they are not competent to undertake it;
· clients and designers must avoid risks to the health and safety of anyone using a structure designed as a work place; and
· all relevant health and safety information must be kept in a file for that project.
In addition, considerable obligations have been imposed, particularly with regard to the co-ordination and dissemination of information necessary to maintain health and safety and for managing the project to the same end.
The above is a very brief summary indeed of the main changes – there are many more and they are of great significance: the roles of many of the participants in construction projects change significantly under the new Regulations.
The Regulations are supported by an Approved Code of Practice (ACoP) – see http://www.hse.gov.uk/pubns/books/l144.htm. Anyone engaged in construction as a client, designer, contractor, subcontractor or in any other way should pay careful attention to the ACoP. Failure to comply with the Code will be taken into account by the courts should something go wrong which leads to legal action.
Further information can be found at http://www.hse.gov.uk/construction/cdm.htm.
If you need advice on the impact of the new Regulations on your business or on any matter of construction law, contact <<CONTACT DETAILS>>.
Context is Key Where Politics Involved
Developers are used to negotiating with the planning authorities of local councils. Whilst the planning department staff are employees of the council, the planning committee of the council is made up of elected representatives. The practical effect of this is that when the political complexion of the council changes, so may its planning policy.
Recently, a case came to court in which a developer had negotiated with a council for a long period to buy from it a plot of land, ownership of which was essential for the construction of a building development.
Shortly before the sale was due to proceed, the local elections changed the make-up of the council. A new councillor was elected who had been prominent in the action group opposing the proposed sale of the land to the developer. The new councillor took a leading role in the council’s decision-making regarding the proposed sale and the council duly decided that it should not proceed.
The developer took the council to court arguing that there was evident bias on the part of the council.
The court rejected the argument. In its view ‘bias could not exist because of a desire to ensure…that the development did not take place.’ Local democracy could not function properly if elected politicians were unable to express their views regarding issues of relevance to the local community and then, when elected, to make decisions based on their expressed views. Only if there was evidence of a ‘closed mind’, which would not be changed if appropriate material were put before it, could there be bias.
The message is that when dealing with local councils over purchases or planning negotiations, developers should keep a weather-eye on election dates and proceed with alacrity if necessary. If a development is likely to attract significant opposition, it is the political process that may well decide matters.
Partner Note
Island Farm v Bridgend County Council [2006] NPC 100.
Landlords – Disability Discrimination Act Limitations Clarified
The Disability Discrimination Act 1995 (DDA) – which was amended in 2005 – has caused concern amongst the owners of let properties for some time because of uncertainty as to the limits of their responsibilities to make the properties they let out ‘disability-friendly’.
A recent case in the Court of Appeal dealt with a situation in which a disabled tenant requested consent for a stairlift to be installed in the building where she lives. The tenant lives on the third floor of the building and the only access to her flat is a communal staircase. The landlord refused the request and the tenant claimed that the refusal constituted discrimination on the grounds of disability and was therefore a breach of the DDA.
The landlord argued that there was no discrimination and that the refusal was not based on disability. The landlord would have refused such a request from any tenant.
The Court of Appeal agreed. When examining the reasons why the landlord refused the request, it was clear that none of these related to the tenant’s disability. Whilst landlords are obliged to make their premises DDA compliant, this does not impose a duty to make physical adjustments for tenants.
Says <<CONTACT DETAILS>>, “This case will come as a relief to landlords, some of whom might otherwise be faced with substantial costs for alterations to buildings which might diminish, rather than add to, the value of the properties concerned.”
Partner Note
Richmond Court (Swansea) Limited v Williams [2006] EWCA Civ 1719, 14 December 2006.
In Brief
Reminder on Landlords’ Deposits
Landlords are reminded that the deposit protection provisions of the Housing Act 2004 are operative from 6 April 2007.
The new law applies to assured shorthold tenancies and creates new obligations for dealing with deposits paid by tenants. Failure to comply with the new law can lead to substantial fines.
If you are a landlord with properties let on shorthold tenancies and you have not yet taken steps to comply with the provisions, do so immediately. Details of the requirements can be found at
Contact <<CONTACT DETAILS>> for advice.
Landlord Need Not Repair Item Not in Disrepair
A tenant who sought to claim from her landlord, after she was cut by broken glass, found that the Court of Appeal did not agree that her landlord was liable for her injury.
Elaine Alker had been injured when the glass in her front door broke, causing a serious injury to her arm. The glass concerned was ordinary glass, not safety glass. She argued that the glass, which was undamaged up to that time, should have been replaced with safety glass, as the dangers of using un-reinforced glass in doors are well known and have been so for many years. She argued that her landlord’s failure to replace the glass was a breach of its duty under s.4 of the Defective Premises Act 1972.
In court, it was ruled that the landlord, Collingwood Housing Association, was in breach of its obligations. The Housing Association appealed.
The Court of Appeal did not agree with the finding of the lower court. The door panel itself was not in disrepair and thus needed no maintenance. Although there was a repairing covenant in the tenancy agreement, the landlord’s duty was to maintain or repair the premises, which is not the same as a duty to keep them safe. That would be an unjustified extension of the statutory language.
For advice on any commercial property matter, please contact <<CONTACT DETAILS>>.
Partner Note
Alker v Collingwood Housing Association [2007] WLR (D) 20. See http://www.lawreports.co.uk/WLRD/2007/CACIV/feb0.4.htm.
Letter From the Taxman Follows Building Work
If you have recently had an extension built or other work done to your property which involved obtaining planning permission, be prepared for a letter from HM Revenue and Customs (HMRC).
In an effort to clamp down on ‘cash in hand’ building work, HMRC are reviewing planning permissions granted and have started sending letters to the property owners. The letters include a form requesting details of the builder’s name, address and VAT registration number, the sum paid and how the payment was made (i.e. whether in cash or by cheque).
In order to make a reply as convenient as possible, the enquiry comes with a stamped addressed envelope.
Partner Note
Source – Institute of Chartered Accountants Alert, 24 January 2007.
Mixed Premises are Commercial
Living ‘above the shop’ is quite common in the small business sector and where the premises are rented, the lease will cover both the business and residential parts of the property. However, the statutory basis for repossession is quite different for commercial and residential premises, especially where the latter qualify as ‘assured shorthold tenancies’.
Recently a landlord was seeking to repossess, on the grounds of arrears of rent, premises it had let to a fishmonger. The premises consisted of the shop on the ground floor, which together with a basement made up the commercial premises, and a first-floor flat in which the fishmonger lived.
The District Judge considered the tenancy to be a business tenancy, and therefore not protected by the provisions which apply to shorthold tenants under the Housing Act. A possession order in favour of the landlord was therefore granted. On appeal, the judge ruled that the initial decision had been wrong in regarding the lease as commercial when a residential tenancy had been created and set aside the possession order. The landlord appealed to the Court of Appeal.
The Landlord and Tenant Act 1954 (LTA) will apply when the premises are occupied for business purposes, and a tenancy which is governed by the LTA cannot be an assured tenancy. The question therefore was whether the occupation of any part of the premises was for the purpose of a business carried on by the tenant. If so, the use of the residential part of the premises was incidental to the lease of the business premises and the tenancy could not be an assured shorthold tenancy.
The landlord won the appeal. The initial purpose of the fishmonger’s lease was to secure business premises, so the LTA applied.
Landlords who let mixed accommodation can expect prospective tenants increasingly to demand separate leases for the commercial and residential parts of the premises. For advice on all property matters, contact <<CONTACT DETAILS>>.
Partner Note
Broadway Investments Hackney Ltd. v Grant [2006] EWCA Civ 1709.
Options and Pre-emption Rights
Prospective purchasers and vendors of land frequently wish to ‘lock in’ the other party to the deal and the means by which this is done will normally involve the prospective vendor either giving the prospective purchaser an option to purchase the land or granting the right of pre-emption over its acquisition.
The two sorts of arrangement might seem at first glance to be the same, but there are significant differences between them.
Under an option to purchase agreement, the prospective purchaser is given the right to buy the land, possibly subject to the occurrence of a certain event or events, for a limited period of time. If the specified event occurs, the right to purchase is absolute.
A pre-emption agreement, however, gives the prospective purchaser the right to be ‘first in the queue’ should the landowner decide to sell the land within the pre-emption period.
Accordingly, an immediate right over the land is created under an option. An option will also bind a future owner of the land in question. A pre-emption agreement, however, does not create an immediate interest in the land. If the owner of the land decides not to fulfil the conditions which ‘trigger’ the pre-emption agreement, the holder of the pre-emption rights will never see them come into effect. However, pre-emption rights in regard to registered land take effect at the time of their creation and can therefore be binding on subsequent owners.
There are two other important differences between options and pre-emption agreements. To be binding, an option must be made in writing. This is because an option is a conditional contract for the sale of land and, under English law, contracts for the sale of land must be in writing. A pre-emption agreement need not be made in writing, although it is sensible to do so. In the case of a pre-emption agreement, the contract for land only comes into effect when the trigger event occurs and the holder of the pre-emption right then makes the offer for purchase, which the landowner is bound to accept. At that stage the contract must be put in writing.
Lastly, an option is incapable in law of being granted for a period exceeding 21 years. A pre-emption right can last for the lifetime of the grantor.
The use of options and pre-emption agreements also create somewhat different tax positions and any negotiation of an option or pre-emption agreement should be carried out with the benefit of professional advice.
Planning – Criteria Must be Real, Not Hoped-For
The owners of an estate in Hampshire that was listed for inclusion in a National Park recently fought the decision all the way to the Court of Appeal and won a victory on the grounds that the ‘opportunities for open-air recreation’ which were necessary for inclusion had to be realistic, not merely aspirational or potential.
The owner’s initial objection had been on the basis that 800 acres of the estate did not meet the criteria for natural beauty and open-air recreation, mainly because there was no public right of way over the land and the owner had no intention of creating one.
A local enquiry led to an inspector and a land assessor inspecting the land and concluding that it did meet the criteria and should therefore be included in the New Forest National Park area under the National Parks and Access to the Countryside Act 1949.
The Court of Appeal rejected the decision, ruling that the inspector had taken too liberal a view of what constituted ‘opportunities for open-air recreation’. Whilst such opportunities could exist in the future, given that the landowner had no intention of allowing public access to the land and there was no way of forcing him to do so, the order was incorrectly made and should be quashed.
Says <<CONTACT DETAILS>>, “Planning decisions which are ill-considered, as in this case, can sometimes be successfully opposed. If you are unhappy about a planning decision concerning your land, or one which otherwise affects you, contact us for advice.”
Partner Note
Meyrick Estate Management Ltd. v Secretary of State for the Environment, Food and Rural Affairs [2007] EWCA Civ 53.
Residential Tenancies – New Deposit Protection Rules
There are two different types of scheme.
Custodial Schemes
Under custodial schemes, the tenant pays the deposit to the landlord who is then required to pay the whole of this amount into a designated scheme account. The scheme administrator will hold the deposit until it is paid to the tenant or landlord, in accordance with their agreement or following a court order, after the tenancy has ended.
Insurance-Based Schemes
Under insurance-based schemes, the landlord retains the deposit and this is only transferred into a scheme if there is a dispute with the tenant at the end of the tenancy. The scheme will then hold the deposit until the dispute is settled. When the tenant and landlord reach agreement, the administrator will distribute the deposit amount accordingly. The scheme will need to pay the tenant regardless of whether the landlord has transferred the deposit to the scheme as required. The landlord pays a premium in order to belong to an insurance-based scheme.
Both types of scheme provide a free alternative dispute resolution service so that those involved can try to resolve disputes without resorting to the courts.
Landlords and letting agents must:
- deal with the deposit in accordance with an authorised scheme;
- comply with the initial requirements of the scheme within 14 days; and
- provide the tenant with the appropriate information relating to the deposit within 14 days of receiving the deposit.
Until this is done, the landlord will not be able to regain possession of the property using the usual ‘notice only grounds’ for possession. Under Section 21 of the Housing Act 1988 a landlord can obtain an order for possession of an assured shorthold tenancy at any point after the first six months of the tenancy, providing any fixed term has expired and they give the tenant at least two months’ written notice.
If a landlord or agent has not arranged for a deposit to be dealt with in accordance with a scheme or provided the tenant with the relevant information within 14 days of receiving the deposit, the tenant can apply directly for a court order for the deposit to be repaid to them or paid into a custodial scheme. If the landlord has failed to comply with these provisions by the date of the court hearing, the court must make the order as requested and order the landlord to pay the applicant an amount equivalent to three times the deposit within 10 days.
Contact <<CONTACT DETAILS>> if you would like individual advice on the new law.
Retention of Deposits
In the UK, property purchases proceed in two stages. The first is when there is an ‘exchange of contracts’, when a deposit (normally five per cent or ten per cent of the purchase price) is paid. On completion, the balance of the purchase price is paid.
Where the vendor is a developer, it is common for the contract to specify that a ten per cent deposit is to be paid, but the developer may well agree to a smaller sum being paid to reserve the property.
In between the exchange of contracts and completion, the prospective purchaser normally has to arrange finance for the completion, which usually involves obtaining a mortgage. Sometimes this proves impossible, or the buyer’s circumstances change so that they cannot complete the purchase. In the situation in which the purchaser has paid a deposit but cannot complete the purchase on the due date, the deposit normally ends up being forfeited by the purchaser and retained by the vendor, who will then re-market the property.
Where a deposit is paid which is less than that stipulated in the contract, the developer may serve a notice on the purchaser demanding that he or she completes the purchase. If this does not go ahead, the developer will normally issue a demand for the balance of the deposit unpaid.
And that, as far as most people believe, is that. However, it is not necessarily so. It is not generally well known that in such circumstances the court can order (s.49 of the Law of Property Act 1925) that a vendor must return to a purchaser any amount of deposit received in excess of the loss they have suffered. If no loss is suffered, then the deposit should be returned in full. If, for example, the property is quickly resold at the same or a higher price, there may be little or no loss to the developer. When the demand is for the balance of the deposit, such an argument is likely to be particularly attractive for the defendant.
For developers who accept ‘part-deposits’, make sure you do not seek payments in excess of the loss you have suffered. Few purchasers will demand repayment of a part-deposit, but claims for the balance of a deposit are more likely to be contested strongly, so in such cases it is important to be able to justify a claim for any loss incurred.
Partner Note
Ref. s.49 of the Law of Property Act 1925.
Taking the Light – Guidance on Compensation
Following a recent case in which a dispute regarding a property owner’s right to light was unexpectedly dealt with by the granting of an injunction against a developer, a more recent case has offered guidance on how much compensation might be payable by a developer, who takes the light of another property, in the more normal circumstance in which the court rules that compensation is payable.
The principles which will normally apply in assessing the damages payable are that they should be:
- fair – in other words, an amount such as would be likely to be agreed following negotiations between the interested parties;
- appropriate bearing in mind the context of the breach and its nature;
- made with the awareness of the strength of the bargaining position that is created by the right to claim injunctive relief, thus preventing or limiting a development, and the profit that thereby might accrue to the person able to claim the injunctive relief;
- based on a fair percentage of the anticipated size of the profit, but if the profit is not known, the appropriate measure is a suitable multiple based on the loss of amenity;
- not so large that the development would not have gone ahead had it been payable; and
- fitting in the circumstances, after taking into consideration all the other relevant factors.
In the case in point, the court awarded the applicant a sum estimated to be 30 per cent of the developer’s expected profits. If unchallenged, the practical implication of this case is that developers whose developments are likely to take the light of adjacent property owners should be aware that failing to negotiate a favourable position at the outset might lead to a considerable reduction in the development profit should the matter end up being decided in court.
Partner Note
Tamares (Vincent Square) Ltd -v- Fairpoint Properties (Vincent Square) Ltd., [2007] ALL ER (D) 1034 (Assessment of Damages) and [2006] 41 EG 226 (Injunction vs Damages ruling).
Tax Compliance Forces Delay
Sales of commercial buildings are subject to VAT if the building in question has been ‘opted to tax’ for VAT. Unless the option to tax is exercised, sales of UK freeholds are exempt from VAT. However, where a sale is part of the transfer of a business (a ‘transfer as a going concern’ in VAT parlance), even an ‘opted’ building will be transferred without VAT being charged. The complexity of the VAT law in such circumstances can create problems, as a vendor who incorrectly raises an invoice for VAT will normally become liable for the VAT charged, even if it is not collected from the purchaser. A purchaser who incorrectly pays VAT in such circumstances does not have the right to recover it on the VAT return. Their only remedy in such cases is to sue the vendor to return the VAT incorrectly charged. Since the sums involved are so large, it is very important to get it right. In practice, VAT issues can create complexities in property sale negotiations as a recent case illustrates.
In the case in point, the vendor put in the contract a clause whereby the company buying the property warranted that it was VAT registered at the time of completion. In the event, when the time came to complete, the purchaser could not give the necessary warranty as its VAT registration was not at that point complete.
The vendor sought damages from the purchaser for the costs attendant to the delay in sale. The Court of Appeal ruled that the purchaser had failed to put itself into the position it had contracted to achieve at the completion date. It had therefore breached the contract and was liable to the vendor for its losses.
The most sensible thing for a purchaser to do in a situation similar to this is to make the contract a conditional one, so that if the VAT registration is delayed, the contract is not breached. Alternatively, a mechanism should be specified which allows the transaction to be completed, but which makes the purchaser not responsible for any additional costs which may result for the vendor as a result of the delay.
From a vendor’s perspective, seeking recompense for any additional costs arising from the purchaser’s failure to complete on the due date – for whatever reason – should not be negotiated away lightly.
Prospective purchasers should bear in mind that if for any reason an application for VAT registration is delayed, the purchaser has no right to compensation from HM Revenue and Customs.
Partner note
Davey v Lombard Asset Management [2006] EWCA Civ 1543.
The New Construction Industry Scheme
Contractors in the building industry are reminded that the new Construction Industry Scheme (CIS) commenced on 6 April 2007 and that the tax deduction rate for subcontractors registered for net payment is 20 per cent (not 18 per cent as previously proposed). Subcontractors who are not registered under the CIS will have tax deducted at 30 per cent.
The new scheme depends on contractors making the correct evaluation of the status of those working for them and care must be taken over this. HM Revenue and Customs’ online employment status tool should be of assistance and it is a comfort to know that PAYE inspectors have been told not to ‘second guess’ decisions made by using it. The online tool allows you to print a copy of the questions and answers used, so that the justification for any particular decision made by using it can be retained.
For information on assessing employment status (this page has a link to the employment status tool), see http://www.hmrc.gov.uk/employment-status/index.htm. Guidance on the CIS can be found at http://www.hmrc.gov.uk/cis/section3b.htm.
Partner Note
HMRC’s ‘Detailed Guidance for the Construction Industry’ can be found at http://www.hmrc.gov.uk/cis/section3b.htm.
Unpaid Rent Claim – Landlord Need Not Mitigate Loss
A common principle in English law is that of mitigation. This means that in cases involving a claim for damages, the person who has suffered the loss for which compensation is being sought is expected to take reasonable steps to minimise that loss.
For example, if a digger driver were to accidentally demolish the wall of a building, the owner of the building would be expected to take reasonable steps to make sure that the open area was covered to prevent rain entering, thereby causing further loss, and to do so within a reasonable period of time. If the owner of the building failed to do so and this led to further damage, this would not be regarded by the court as being primarily the fault of the digger driver.
Recently, a case involving landlords and tenants in Hampshire showed that the duty to mitigate one’s loss is not absolute.
The tenants were a professional firm which occupied rented offices. When they decided to cease practising, they vacated their offices and stopped paying the rent due under the lease. The landlords took no steps to repossess or re-let the property and sued the tenants for the unpaid rent.
The tenants argued that by not instructing estate agents to find a new tenant, the landlords had failed to mitigate their loss. However, the Court of Appeal could not accept their argument.
The Court considered that had the landlords repossessed the property, their claim would have been (at least in part) a claim for damages. In that case they would have been compelled to mitigate their loss. However, what they did instead was simply to sue the tenants for the unpaid rent, which was not an unreasonable action to take and which (crucially) was not a claim for damages, but for the payment contractually due under the lease. The tenants were therefore liable for the balance of the unpaid rent under their lease.
This case has implications for landlords and for tenants. Tenants who wish to vacate premises before the end of their lease would be well advised to negotiate the surrender of the lease with their landlords, or at least agree a strategy for finding a new tenant.
Landlords faced with tenants who vacate their premises in similar circumstances should consider carefully whether they should repossess the premises or sue for the unpaid rent. Normally, this will be a practical decision based on the likelihood of being paid even if successful in the claim and the ease of re-letting the premises.
For assistance in all lease negotiations contact <<CONTACT DETAILS>>.
Partner Note
Reichman and Dunn v Gauntlett and Beveridge, Court of Appeal, 13 December 2006. Reported in the Times, 4 January 2007.
Unreasonable Action Spells Defeat
A decision in a recent case involving a building dispute has yet again emphasised that the court expects persons in dispute to act reasonably.
The case involved a claimant, Mr McGlinn, who sued for damages a firm of architects and a firm of builders which had been involved in building a house on Jersey for him.
The house was in the course of construction when Mr McGlinn, who believed the property to be badly designed and constructed, demanded that it be demolished and rebuilt, relying on expert advice to support his decision. He considered that the cost of rectifying the defects would be greater than that of demolition and rebuilding. He had the house demolished and then sued the architects, who were responsible for the original design and for supervising the building project, and the builders who built it.
The first issue concerned the responsibilities of the architects being sued. The court could not accept that their responsibility extended so far as to ensure the production of a perfect building, so they could not be liable for missing some examples of defective work. However, the inspection programme adopted by the architects was considered to be too rigid and the inspections done at too infrequent intervals. The court ruled that some of the defects claimed were not the responsibility of the architects and it rejected some of the claims altogether.
In the court’s view, Mr McGlinn’s demolition of the property was an excessive reaction. Firstly, much of his criticism of the property had been aesthetic and did not concern the structural soundness of the building. Secondly, the claims accepted as valid by the court were not of themselves sufficient to justify the demolition and rebuilding of the property. The cost of rectification of the defects was less than the cost of rebuilding the property. The fact that Mr McGlinn had taken expert advice did not make his approach reasonable. He was entitled only to receive compensation for the cost of rectifying the defects judged to be the responsibility of the defendants.
Partner Note
McGlinn v Waltham Contractors and ors, QBD, 21 Feb 2007. Reported in the Times 20 March
What Constitutes Agreement of Title?
When a person (‘the squatter’) occupies a property for more than 12 years and the owner of the property does not take any steps to assert their rights over it, the squatter may be able to obtain legal title to the property in question through what is known as ‘adverse possession’.
However, when the occupant of the property acknowledges that they do not own it, the owner will retain the title to the property regardless of its occupation by the squatter. Recently, a case came to court in which an owner received such an acknowledgement, but one which was not in fact given legitimately.
In the case in point, a couple entered a property with a view to acquiring title to it by adverse possession. They subsequently arranged for the wife to enter into a lease, ostensibly with the owner of the property, and arranged for solicitors to act on their behalf. That appeared to be that. However, the husband had, in fact, arranged for a friend to impersonate the owner of the property for the purposes of signing the lease. When the owner of the property eventually instructed solicitors to act on his behalf in respect of the property, a copy of the lease was sent to his solicitors.
By this time, the husband had died. The owner of the property did not issue proceedings for possession against the wife until more than 12 years after the couple had first entered the property and began to live in it. In her defence and counterclaim, the wife pleaded adverse possession and counterclaimed for a declaration that she had acquired a title to the property. The lower court concluded that there had been no acknowledgement of title and the adverse possession claim was therefore established.
The Court of Appeal disagreed. The fact that the bogus lease could not bind the owner was irrelevant – the wife had signed the document and in doing so had acknowledged the owner’s title to the property.
Recent changes in the law of property make it more difficult in practice to obtain legal title to land by adverse possession. However, if you allow others to use land you own as if it were their own, without putting in place the appropriate documentation, you are taking a risk. Contact <<CONTACT DETAILS>> for advice on all property matters.
Partner note
Rehman v Benfield [2006] EWCA Civ 1392.